Correlation Between McDonalds and Bellatora
Can any of the company-specific risk be diversified away by investing in both McDonalds and Bellatora at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining McDonalds and Bellatora into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and Bellatora, you can compare the effects of market volatilities on McDonalds and Bellatora and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in McDonalds with a short position of Bellatora. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and Bellatora.
Diversification Opportunities for McDonalds and Bellatora
Good diversification
The 3 months correlation between McDonalds and Bellatora is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Bellatora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bellatora and McDonalds is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on McDonalds are associated (or correlated) with Bellatora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bellatora has no effect on the direction of McDonalds i.e., McDonalds and Bellatora go up and down completely randomly.
Pair Corralation between McDonalds and Bellatora
Considering the 90-day investment horizon McDonalds is expected to generate 62.91 times less return on investment than Bellatora. But when comparing it to its historical volatility, McDonalds is 26.09 times less risky than Bellatora. It trades about 0.06 of its potential returns per unit of risk. Bellatora is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 64.00 in Bellatora on August 29, 2024 and sell it today you would earn a total of 21.00 from holding Bellatora or generate 32.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
McDonalds vs. Bellatora
Performance |
| Timeline |
| McDonalds |
| Bellatora |
McDonalds and Bellatora Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and Bellatora
The main advantage of trading using opposite McDonalds and Bellatora positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, Bellatora can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Bellatora will offset losses from the drop in Bellatora's long position.| McDonalds vs. Chipotle Mexican Grill | McDonalds vs. Dutch Bros | McDonalds vs. Dominos Pizza | McDonalds vs. Yum Brands |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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